Are Insured-Appointed Appraisers Without a Public Adjuster License Breaking the Law?

The State of Florida, through its Department of Financial Services, is making a legal argument that those appointed as an appraiser by an insured must fall within the license requirements of a public adjuster. Florida is making this argument in an administrative hearing where they are trying to discipline a public adjuster.1 Buried in that case is the following argument by the Department, which, if successful, will change who may be appointed as appraisers: 

The Counts VI, IX, and X require analysis of two threshold issues: 1) as to Counts VI

and X, whether appraising is conduct that falls within the scope of the definition of a public adjuster in section 626.854(1), Florida Statutes….

The term ‘Public Adjuster’ is defined in section 626.854(1), Florida Statutes.

A ‘public adjuster’ is any person, except a duly licensed attorney at law as exempted under s. 626.860, who, for money, commission, or any other thing of value, directly or indirectly prepares, completes, or files an insurance claim for an insured or third-party claimant or who, for money, commission, or any other thing of value, acts on behalf of, or aids an insured or third-party claimant in negotiating for or effecting the settlement of a claim or claims for loss or damage covered by an insurance contract or who advertises for employment as an adjuster of such claims. The term also includes any person who, for money, commission, or any other thing of value, directly or indirectly solicits, investigates, or adjusts such claims on behalf of a public adjuster, an insured, or a third-party claimant.

…

Under the first test, individuals act as a public adjuster when they: directly or indirectly act or aid in the negotiation for or in effecting a settlement of a claim or loss damage covered by an insurance contract, on behalf of an insured, for money, commission, or any other thing of value.

Under the second test, individuals act as a public adjuster when they: directly or indirectly investigate a claim, on behalf of a public adjuster, insured, or third-party claimant, for money, commission, or any other thing of value.

…

Because the work of an appraiser falls within the statutory definition of ‘public adjuster,’ an appraiser is subject to the requirements of the Florida Insurance Code. This would include the Adjuster’s Code of Ethics. Accordingly, Respondent is subject to discipline for misconduct occurring during Respondent’s work as an appraiser.

With the hundreds of appraisal case opinions in Florida and thousands of appraisal cases in the country, there is not one case opinion by any judge ever saying that the policyholder’s appraiser must be a licensed public adjuster. The Florida Department of Financial Services is asking this administrative judge to be the first to make such a pronouncement.    

Researching the issue, I surprisingly found one opinion seemingly supporting the Department’s position—a 2018 post written by a former Merlin Law Group attorney as part of this blog, Are Property Insurance Appraisers Regulated? – A Reminder of Recently Enacted HB 911 for Those Heading to Florida to Assist with Hurricane Michael:

The amended statutes have made clear that the who is only a public adjuster and/or an attorney at law that may for money, commission, or any other thing of value, directly or indirectly, prepare, complete or file and claim for an insured; negotiate or effect the settlement of a claim; or investigate, or adjust a claim on behalf of the insured. Since the task of an appraiser is to investigate, adjust, prepare or complete the claim, and negotiate or effect the settlement of a claim, an appraiser that is not a licensed adjuster may regrettably be found to be adjusting without a license or engaging in the unauthorized practice of law.

For what it is worth, that is not my legal opinion. Appraisal is not adjusting work.  It is what may happen after the adjustment fails. Public adjusting is not appraisal. 

I did raise the issue a year ago in The Florida Department of Financial Services Wrongly Believes Appraisers Need to Be Florida-Licensed Adjusters, where I stated:

Appraisers in an insurance appraisal proceeding are not adjusters. They are not adjusting the claim. Adjusting a claim is very different from what participants in an appraisal are required to do. Maybe insurance regulators need to show up for some continuing education courses at next month’s Windstorm Conference or at an IAUA training seminar to learn more about those differences between adjustment and appraisal and how appraisals are an alternative dispute resolution process. 

If we want to write laws so people know what is legal versus illegal, they should be clear.  If we want to require a license to be an appraiser or an umpire in the appraisal process, we should write a law specifically explaining that. We can write a law limiting appraisers to licensed adjusters, but there is no such law today.

It appears to me the Department of Financial Services attorneys are simply trying to win their case at any cost. They are making an alternative argument about how a statute with criminal implications can be argued to apply to appraisal when no judge, no case, and no clear statute has ever indicated that only public adjusters can be a policyholder’s appraiser.  

On the other hand, there is a first time for everything! Maybe the Administrative Judge will agree with the Department of Financial Services.  If so, who can be appointed as an appraiser will be much more limited and have criminal implications for those not licensed.     

Thought For The Day  

An intelligent person is never afraid or ashamed to find errors in his understanding of things.

—Bryant H. McGill

1 Dept. of Financial Services v. Thomas, DOAH No. 22-984PL [Department’s Proposed Written Report and Recommended Order] (Fla. Div. of Admin. Hrgs. – filed Dec. 16, 2022).